Kickstarter Boldly Locks Its Mission Into Its Legal Framework

Kickstarter has long purported to be a mission-driven company, but it has just taken that commitment to a whole new level.

The Brooklyn, N.Y.-based crowdfunding platform, which was founded in April 2009, announced that it has legally become a public benefit corporation. Unlike a C corporation, which dictates that a business must first and foremost respond to the needs of its shareholders, Kickstarter now will be legally protected as it makes business decisions that align with its mission, first and foremost. It cannot be dragged into court for making decisions that put purpose before profit.

“We've codified our mission and values at the deepest possible level,” says co-founder Yancey Strickler, in a tweet this morning.

Becoming a benefit corporation does not mean the company is not-for-profit. Kickstarter has been profitable for “several” years, and in the last three years, the crowdfunding platform has had profits between $5 million and $10 million, according to Justin Kazmark, a spokesperson for Kickstarter. Instead, the move is a commitment and legal protection for Kickstarter to operate in a way that not only benefits its bottom line, but also benefits its community.

“Companies that believe there are more important goals than maximizing shareholder value have been at odds with the expectation that for-profit companies must exist ultimately for profit above all,” wrote Kickstarter’s founders in a blog post published this morning. “Benefit Corporations are different. Benefit Corporations are for-profit companies that are obligated to consider the impact of their decisions on society, not only shareholders.”

Kickstarter spelled out how it will benefit society under its new legal framework and its five pillars range from bringing creative projects to life to a commitment to the arts and fighting inequality. Perhaps most notably, as part of its new charter, the crowdfunding platform says that it will donate 5 percent of its after-tax profits towards arts and music education, and to organizations fighting to end systemic inequality.

While companies have long had corporate give-back programs or written, in some cases, impressively large checks to various charities throughout history, the spread of benefit corporation law across the U.S. speaks to a growing trend of for-profit and for-purpose companies. Much of the push has been driven by millennials, both as consumers and employees, who are looking for companies to make social responsibility a part of everyday operations.

“Public benefit corporations are not a replacement for traditional corporations in America. But as the next generation of publicly-traded companies comes into being, benefit corporations will be among them, helping to build public trust in business, and becoming an attractive investment opportunity for the growing number of investors who increasingly want to make money and to make a difference,” wrote Gov. Jack Markell of Delaware in July of 2013 when his state passed legislation making it possible for a company to organize as a benefit corporation.

To be sure, pushing all of your chips to the middle of the table is bold -- but it is also risky.

Kickstarter has raised less than $15 million so far and its co-founders retain the majority of the company’s ownership, according to Kazmark. However, if Kickstarter does want to raise more outside capital, being aggressively mission-driven may indeed cause some investors to pinch their wallets a bit tighter, and it may even push some investors away completely.